Home Office ministers were forced to call a halt to the reform of the formula in November, and Keith Vaz, the chair of the committee, said the pause was necessary because the errors made had "gravely damaged" the police's confidence in the process.

"The current police funding formula has become unfit for purpose, and this review was welcome," he said.

"Instead of designing a process which truly engaged the police and police and crime commissioners, they were shut out, with the Home Office denying them access to data and giving them an impossibly short amount of time to submit evidence.

"Police forces found themselves on a roller-coaster , where at the stroke of a pen they saw their funding allocation plummet in some cases and rise meteorically in others, with nobody able to explain why. It would be charitable to call it a shambles."

A committee spokesman said the Home Office must recognise the full range of factors which drive demand on the police, including specific local demands created by tourist areas, emerging crimes such as cyber-crime, and counter-terrorism resources - which are "particularly important" since the Paris attacks on November 13.

They added that the committee does not support the idea of local communities "crowd-funding" extra police forces for their areas because of the disadvantage this would create for poorer communities.

Chancellor George Osborne revealed in the Autumn Statement there would be no cuts to the police budget, and Mr Vaz said this provides the Home Office with a "real opportunity".

He said: "The Chancellor's announcement to protect overall police funding in the Spending Review was welcome, which taken with the minister's decision to suspend the review provides a real opportunity.

"An independent panel should be appointed to assist in formulating revised proposals. We hope the assistance and advice of external experts will deliver a fair and effective funding formula."

The committee's spokesman said: "The committee considers the error at the Home Office to be sufficiently serious to name the official involved, and calls upon the Permanent Secretary to update it by Christmas on the outcome of the review into this incident and what disciplinary action will be taken where serious errors are found to have been made.

"The Home Office set, by its own admission, an 'extremely challenging' implementation date for the new funding formula, and failed to set out the envisaged transitional arrangements to the new formula which could have reassured police forces."

National Police Chiefs' Council chairwoman Sara Thornton said: "It is vital that there is confidence in the funding formula review process. Inclusion and involvement will help achieve this.

"Chief officers will work closely with the Home Office to help them develop a new allocation which is transparent and fair - sharing our professional judgement and explaining what forces need in an era of changing demand.

"Ultimately, this is about keeping people safe. Police funding must be put on a sustainable and long-term footing with appropriate transition arrangements."

Mike Penning, the minister for policing, crime, criminal justice and victims, said: "The current model for allocating police funding is complex, opaque and out-of-date. That was why we consulted on principles for reform of funding arrangements for the police in England and Wales, ensuring they are fair, robust and transparent.

"I have been clear that the error made in data showing the indicative impact of our proposed model on forces was wholly unacceptable. I have apologised to Parliament and to Police and Crime Commissioners and forces for it.

"We have always said that we will only be successful in achieving our aim of building a fit-for-purpose and sustainable model with considerable input from policing partners.

"The Government notes the committee's report and will respond formally in due course. We will consider the committee's recommendations carefully as we work with partners on next steps."

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